Change in valuation matrix, maintain HOLD. 3QFYMay13 results came in in-line with expectations, 9MFYMay13 revenue and net profit are up 5.1% and down 24.2% YoY to 350.7m and 30.7m respectively, due to a lack of property earnings recognition this year. As we roll over our earnings forecast to FYMay14, we have changed our valuation matrix from P/E to SOTP valuation to account for its diversified businesses. We maintain HOLD with a higher TP of SGD0.49. We believe the market has already factored in earnings coming from its property development projects.

Four contracts secured year to date. Year to date, Lian Beng has secured a total of four contracts – two residential projects of Skies Miltonia and Bartley Ridge and two construction and engineering contracts for Oxley’s industrial project which add up to SGD538m of contract wins, exceeding our previous estimate of SGD300m for FYMay13. This brings Lian Beng’s orderbook up to SGD986m. We are estimating SGD400m in contract wins in FYMay14, sustaining its orderbook at current levels.

Midtown @ Hougang to begin preview. With the recent cooling measures targeting individual retail units, we believe that Lian Beng will not be as affected as they have submitted plans prior to the measures being announced. The Midtown @ Hougang (ex. Hougang Plaza) will begin preview this month. In addition, Lian Beng has joined with KSH and Kim Seng to purchase a commercial plot in 160 Changi Road, and intends to redevelop the site. Assuming a 60/40 split - we estimate the commercial and retail ASP to be at SGD2,000 and SGD2,500psf respectively, and be accretive by 1.3cts to its value per share.

Look out for FYMay14. Lian Beng will be completing its construction of M-Space @ Mandai in September 2013, while the 1st phase of its workers dormitory will be completed and launched in June 2013. So far, the workers dormitory has achieved a 50% commitment rate, and we expect this to ramp up to over 95% within 6 months of launch due to the overwhelming demand and lack of supply for workers dormitories.

Source: Maybank Kim Eng Research - 12 Apr 2013